Wt Copper 1x S Discussion Threads

[spob] 28/1/2010 21:09

Copper falls below $7,000 in rattled trade

By Gregory Meyer and Chris Flood

FT

January 28 2010 20:48

Copper sank below the key $7,000-a-tonne mark Thursday as a wave of selling swept across the base metals sector.

"Things will definitely be interesting over the next few days," said one trader who noted that hedge funds which base their trading strategies on macro-economic models were now betting on further price weakness for copper.

With copper down 5.2 per cent to $6,845 a tonne, a technical analyst said there was little to support prices above the $6,000 level if the sell-off gained momentum.

Robin Bhar, senior metals analyst at Calyon, said "sentiment is rattled", adding that base metals were reacting to the threat of tighter monetary policy in China, President Obama's plans to reform Wall Street, and the re-emergence of sovereign risk.

Aluminium fell 4 per cent at $2,093 a tonne whilelead lost 4.5 per cent at $2,030 a tonne.

Crude oil prices moved lower with Nymex March West Texas Intermediate down three cents to $73.64 a barrel while ICE March Brent lost 11 cents at $72.13 a barrel.

US natural gas prices dipped with Nymex March Henry Hub down 0.5 per cent to $5.2000 per million British thermal units after inventories data showed US stocks fell 86bn cubic feet last week, below the consensus forecast for a drop of 105bn cubic feet.

US natural gas, the most volatile commodity futures market, has been among the most puzzling of late.

For months, speculators have appeared to hold a negative view of the outlook for gas prices, based on government data on futures and options on the New York Mercantile Exchange.

But new data on a previously unregulated gas swaps market indicates that speculators have been making more bullish, or at least more complicated, bets than previously believed.

The additional data covers the main gas contract on an over-the-counter trading platform run by IntercontinentalExchange. Lawmakers empowered US regulators to collect the information on concerns that ICE traders were influencing consumer gas prices.

On Nymex, the so-called "managed money" – hedge funds and short-term momentum players known as commodity trading advisers – held a net short position in benchmark Henry Hub natural gas futures and options. However, on ICE, buyers outnumbered sellers in the managed money crowd by a ratio of 20 to one.

"Clearly, the Nymex position data are telling us one story, and the ICE positions tell us a different story," said Tim Evans, energy analyst at Citi Futures Perspective.

Why the positions diverge is a mystery. Some observers suggest it might reflect the fact that Nymex has a busy gas options market, while ICE does not.

Traders might also be seeking ways to arbitrage price differences between the two markets.

Traders are usually cautious in interpreting the data from the Commodity Futures Trading Commission because the regulator pigeonholes large, sometimes diversified traders into single categories.

The data also does not capture trading in most over-the-counter markets.

Gold slipped 0.2 per cent to $1,084 a troy ounce, under pressure from dollar strength.

[spob] 15/1/2010 19:16

you're welcome

[contrarian2investor] 15/1/2010 19:07

Hi spob,

Thanks for starting this thread.

I have been tracking this for months now.
Today I finally bought 20% of my target holding of SCOP.
I will continue to track the market and complete my holding of SCOP over the next 3-5 months.


Here is an article that might be of interest:

US copper ends down in range, rising supplies drag
Released 18:55 15-Jan-2010




c2i

[spob] 11/1/2010 08:40

Copper Hitting Goldman's Target One Year Early Means 20% Drop



January 10, 2010, 07:32 PM EST MORE FROM BUSINESSWEEK
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By Millie Munshi

Jan. 11 (Bloomberg) -- Copper's fastest rally on record may fall victim to inventories that have soared to a six-year high, slower sales to China and the winding down of government stimulus programs.

Global supplies have ballooned 85 percent since June into the largest stockpile since 2004. Shipments to China, the biggest user, have fallen in three of the past six months. Mining companies including BHP Billiton Ltd. and Rio Tinto Group Plc that trimmed expansion plans during the recession are increasing production to take advantage of prices that gained 140 percent last year and 1.2 percent since.

The rally surprised even copper bulls as governments pledged as much as $12 trillion to combat the worst recession in seven decades and China imported more than ever in the first half. Copper for delivery in three months closed at $7,461 a ton on the London Metal Exchange on Jan. 8, after Goldman Sachs Group Inc. predicted in September it wouldn't rise that much until late 2010 -- a call that came when the median Bloomberg survey forecast was bearish.

"The rocket fuel that sent prices higher last year isn't going to exist anymore," said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors and predicted 2009's copper rally and 2008's first decline in seven years. "Higher inventories are clearly pointing to a lack of demand. The economy was on government life support that isn't sustainable. It's hard to make the case for high copper prices."



Commodity Ph.D.



Known as the commodity with an economics Ph.D. because it serves as a leading indicator, the metal outpaced crude oil and the U.S. equity market in 2009. The advance, aided by a weaker dollar, was the biggest since at least 1987, as far back as data compiled by Bloomberg go.

The price touched $7,796 a metric ton on Jan. 7, the highest since August 2008. It then fell after China's central bank said it would curb a record expansion in lending and sold three-month bills at a higher interest rate for the first time in 19 weeks.

Last year's surge prompted forecasters to increase fourth- quarter predictions as copper beat all industrial metals except lead's 143 percent gain. The median copper forecast in January 2009 underestimated its jump by 64 percent.

Goldman raised its estimate for 2010's fourth quarter at least three times after saying last January prices would fall. Its Sept. 8 prediction called for an 18 percent gain to $7,650 and was 34 percent above the median estimate at the time, which forecast a 12 percent drop.



Price Outlook



The metal will fall to as low as $6,445 a ton this year, a 13 percent drop from the Dec. 31 close, according to the median forecast in a Bloomberg survey of 11 strategists. Lead and zinc are the only metals seen doing worse, with predicted declines of 16 percent and 19 percent, Bloomberg surveys show. Pento, based in Holmdel, New Jersey, said copper may touch $2.75 a pound, or $6,063 a ton.

Theresa Gusman, who helps oversee $215 billion as global head of commodities for Deutsche Bank AG's DB Advisors unit, predicts the consensus will be wrong again.

"We believe that Chinese demand will remain strong, and the rest of the world is going through a restocking cycle," she said. "Inventories are higher, but they're not that much higher than they were a few years ago when copper prices were still rising."

Stockpiles monitored by the exchanges in London, Shanghai and New York total 699,606 metric tons, the most since Feb. 4, 2004, when copper cost $2,553.



Supply Fundamentals



"The easiest way to look at this now is to compare where copper prices were the last time inventories were this high," said Ryan Atkinson, the chief market analyst at New-York based Balestra Capital Ltd., which oversees $1.1 billion. "We think copper belongs at about $2, given the fundamentals," he said, meaning $4,409 a ton.

Back in 2004, copper was in the midst of a six-year rally that sent prices up more than four-fold by the end of 2007. It gained 37 percent in 2004 because supplies monitored by the London Metal Exchange, the world's biggest metals bourse, were in the middle of an 89 percent plunge -- the biggest drop since at least 1971.

Today, stockpiles are heading up. Copper has climbed 50 percent since June 30 even as global inventories rose for six straight months. That's the longest supply increase since 2008, when prices collapsed by a record 54 percent as the recession slashed demand. Stockpiles monitored by the Shanghai Futures Exchange more than quadrupled last year, a sign the country may have overbought in the aftermath of a 4 trillion yuan ($580 billion) stimulus program.



Inventory Gains



Stockpiles may grow another 10 percent by March 31, said William O'Neill, a partner at commodities research firm Logic Advisors in Upper Saddle River, New Jersey, who correctly predicted copper's 2008 tumble.

Producers are increasing output after rising prices lifted profits and shares. The stock of BHP Billiton, the world's biggest miner, jumped 42 percent in 2009. The Bloomberg World Mining Index of 87 producers almost doubled in 2009, the most since the data begins in 2004.

Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded producer, said in October its third-quarter profit rose 77 percent. Freeport shares more than tripled last year.



Boosting Output



Lima, Peru-based Cia. Minera Antamina SA said on Jan. 5 it approved spending $1.29 billion to boost ore-treatment capacity at the world's biggest combined copper and zinc mine by 38 percent. Controlled by BHP Billiton in Melbourne and Xstrata Plc in Zug, Switzerland, Antamina said it will complete the northern Peru mine's expansion by 2012.

China also has ramped up production, increasing output for six straight months and reaching a record in November. The country plans to rely less on imports by investing in commodity- rich countries, Zhang Xiaoqiang, the vice chairman of the National Development and Reform Commission, said on Jan. 5.

Eugen Weinberg, a commodity analyst for Commerzbank AG in Frankfurt, said speculators are helping drive up prices.

"Demand from investors is higher than demand from consumers," Weinberg said. "There is a lot of material out there, and demand is not justifying these current price levels."

Copper for immediate delivery is trading at a $40-per-ton discount to contracts on the Shanghai Futures Exchange that expire this month. That means "demand for the physical metal is lagging behind," Leon Westgate, a London-based Standard Bank Plc analyst, said in Jan. 5 report.



Slowing Demand



Declining purchases by the homebuilding industry and a slowing global recovery also will hurt prices, said Balestra's Atkinson.

Construction spending in the U.S. fell for a seventh straight month in November to the lowest level in more than six years. The drop shows housing may weaken when the government's homebuyer incentives expire later this year, said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York who also foresaw copper's 2008 drop.

That program was part of a $787 billion package of emergency spending measures. In all, Group of 20 countries pledged to combat the recession with as much as $1 trillion in stimulus spending and $11.9 trillion in loan guarantees, capital injections, asset purchases and expanded central bank balance sheets, according to the International Monetary Fund.

As stimulus efforts wind down, there's about a one-third chance the U.S. economy will slide back into a recession during the second half of 2010, Nobel Prize-winning economist Paul Krugman said in an interview on Jan. 4.



Housing 'Headwinds'



Builders use about 400 pounds of copper in the average American home and are the biggest consumers in the U.S., accounting for about 40 percent of the total, according the Copper Development Association.

Housing and mortgage markets are facing "headwinds," including foreclosures and tight credit, that are "relatively strong and are likely to restrain the pace at which the residential construction sector recovers," Federal Reserve Governor Elizabeth Duke said in a speech on Jan. 4 in Raleigh, North Carolina.

Growth in the U.S. will slow to 2.7 percent this quarter, according to the median of 60 economists in a Bloomberg survey. The economy expanded at a 3 percent rate in the fourth quarter of 2009, according to the survey respondents.

"We don't think that sustainable growth is going to be strong enough to support higher copper prices," said Atkinson of Balestra. "It's a situation like the tech bubble, where fundamentals have become completely disconnected from the copper price."

[peterstilgoe] 28/7/2005 20:22

Near perfect fib retracment levels on CCO since mondays rise

[peterstilgoe] 27/7/2005 11:46

Island Bottom at MLR ?

[peterstilgoe] 06/7/2005 17:32

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